India’s top car makers cut down production despite festive season

It seems the problems are never ending for car manufacturers in India. Car manufactures have cut down production now just when the festive season’s on the run. This wasn’t seen in India for a long time in a decade. Recent hike in interest rates and fuel seems to be the likely culprit behind a lot of vehicles being unsold and stacked and unable to be dispatched due to a sudden demand drop.

It wasn’t the same scenario last year where in September 2010 and October 2010 recorded a growth of 30% or more. This sudden silence in auto sales is due to economic instability and demand slowdown in the automobile industry throughout India.

Maruti usually speed up production this time around when the festive season starts, but due to the ongoing situation has cut production down by 10% to 20% on some models. Maruti is currently going through a bad phase with inadequate production due to labour issues at their Manesar unit, and the economic situation that’s persisting at the moment is making the situation even worse. There has been some slight realignment in Tata Motor’s production and Hyundai Motor’s looking into exporting their cars that are being produced for the local market.

All the three bigwigs namely Hyundai, Maruti and Tata are not replying to queries via email; however, another senior official from Maruti tells the company would increase production only if there is a demand to do so. The official further says they didn’t want to stack up existing vehicles and hence cut down production of some models currently. He told they are meeting fortnightly and would be increasing production only if the demand is up.

VP, Balendran, GM India told car manufacturers overall tend to see 20% plus growth in volumes when the festive season starts. He tells with the current rising interest rates, high inflation, rise in petrol, and negativity surrounding the market, they were not expecting sales in volumes to reach higher than 5% at the moment.

Around 70% of automobiles sold in India are on credit and that has risen to three hundred basis points in the past one and a half years. Furthermore, the difference in rates between diesel and petrol is Rs. 25 due to which 90% of petrol cars are stacked up and companies not being able to sell them. As a result, there is a huge demand for diesel cars while selling petrol cars poses a big headache to car manufacturers, and it’s getting harder as the days go by despite companies offering discounts and various schemes to push sales. None of the manufacturers have really gained during the festive season, i.e., Onam and Ganesh Chaturthi.

These events are not favouring Maruti at all despite 80% of customers who’ve already booked the diesel variants of its Swift with large numbers of cars yet to be sold and cars currently stacked up in their plants. Maruti’s Gurgaon plant that manufactures petrol variants are not selling, and the Manesar plant, as we know is gripped with labour issues, manufactures Swift.